Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6700.
- Add a stop-loss at 0.6500.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6700.
The AUD/USD exchange rate continued its strong comeback as investors waited for the upcoming Federal Reserve interest rate decision and its potential divergence with the Reserve Bank of Australia (RBA). It rose to a high of 0.6640, up from last month's low of 0.6420.
Fed and RBA Divergence
The main factor influencing the AUD/USD pair is the fact that the Reserve Bank of Australia (RBA) will deviate from the Federal Reserve on policy soon.
On the one hand, analysts believe that the Fed will cut interest rates by 0.25%. It will be the third consecutive interest rate cut this year, and will come a week after it ended its quantitative tightening (QT) policy.
Fed officials are concerned that the labor market is not doing well, with the unemployment rate continuing rising. A report by ADP showed that the economy unexpectedly lost 32,000 jobs, the biggest increase in over two years. This report largely confirmed the view that the bank will cut interest rates, with Polymarket odds rising to 93%.
On the other hand, there are signs that the Reserve Bank of Australia (RBA) will likely leave interest rates unchanged or hike by 25 basis points in the next meeting.
Odds that the bank will maintain a hawkish tone rose after the country published strong inflation numbers recently. The headline inflation report rose at a faster pace than what analysts were expecting. It moved further away from the bank’s target of 2.0%.
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Looking ahead, the pair will also react to the upcoming Australia jobs report on Thursday. Economists expect the upcoming report to show that the economy created 20 jobs in November, while the unemployment rate rose a bit to 4.4%.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has been in a strong uptrend in the past few days. It has jumped from a low of 0.6420 in November to the current 0.6640. It recently crossed the important resistance level at 0.6617, its highest point on October 29. This price was the neckline of the double-botttom pattern at 0.6420.
It has moved above the 50-day moving average, while the Relative Strength Index and the MACD have pointed upwards. Therefore, the pair will likely continue rising as bulls target the key resistance at 0.6700, its highest point on September 17.
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